Eastman Chemical Co., a Kingsport, Tenn.-based manufacturer of chemicals, fibers and plastics, has aggressive goals for procurement of indirect goods and services (those not used in the production supply chain): It wants to cut costs by $30 million worldwide and make the process faster and easier.

Debbie Davis-Waltermire, director of worldwide indirect materials and services at Eastman, says she can achieve those goals using the Webango Network, a procurement system hosted by Webango Inc. in Santa Clara, Calif.

The service's Web-based tools include forms for creating requests for proposals (RFP), a system for routing bid requests to suppliers and analysis tools for reviewing the bids. Vendors reply to requests on the Webango Network, so bids are presented in a consistent format.

According to Davis-Waltermire, Eastman Chemical has completed two contracts using Webango in the three months since it adopted the service, and it expects that 90 percent of its North American contracts for indirect goods will come through the Webango Network by year's end. Using Webango, Eastman can complete the procurement process in half the time it used to take, she says.

Casting a Wider Net

By automating the request-for-information and RFP processes, Webango has allowed Eastman Chemical to broaden the number of suppliers it asks to bid on contracts, says Davis-Waltermire. The company's previous method of handling bids involved shuffling paper bids and typing contract particulars into spreadsheets for analysis. That greatly limited the number of bids Eastman wanted to deal with, she says.

Now, she adds, storing specifications and bids electronically from start to finish reduces paper handling and eases the process of ranking bids. "Webango enables us to assimilate a lot of information from more people than we could do in the past. And far more quickly than we could in the past," Davis-Waltermire says.

Pierre Mitchell, an analyst at Boston-based AMR Research Inc., says Eastman isn't alone in evaluating suppliers and their bids by spreadsheet. Even companies that are savvy about sourcing and understand their business processes end up resorting to typing bid information into spreadsheets to figure out the best offer.

Every company hunts for suppliers, but not all companies will get maximum benefit out of Webango, says Mitchell. The best candidates are large, decentralized organizations with heavy indirect and direct procurement needs.

Gaps Remain

Webango has places to improve, Mitchell says. For example, he says, it doesn't assist with the identification of potential suppliers, its analysis tools could be extended and it does little to help with contract management once a bid is selected. Moreover, its customer list is small.

It could also go further with contract management and fill a large hole left by operational systems, like financial and enterprise resource planning applications, that support only basic terms and conditions of payment. And it could offer the ability to analyze existing spending by partnering with an established analytics vendor, such as ShareMax Inc. in Parsippany, N.J., says Mitchell.

Davis-Waltermire says she too would like to see Webango add a contract management tool. She says she also would like to see supplier-performance histories that describe other customers' experiences in areas like quality of goods and on-time delivery.

Rami Goraly, Webango's CEO, says such a benchmarking tool will be available in the second half of the year. The addition of that feature is among the goals included in a two-year product road map that's aimed at filling some holes.

The company also plans to address the fact that the Webango Network won't integrate with customers' back-end systems. Webango plans to partner with a business-to-business enterprise application integration vendor that will provide hooks between the Webango Network and back-end systems from vendors such as London-based Invensys PLC, SAP AG and Pleasanton, Calif.-based Peoplesoft Inc. That functionality will come in the first half of the year, says Goraly.

Niche Service Matches a Need

Webango's offerings are part of the larger strategic sourcing market, which encompasses products and services designed to optimize the selection and management of suppliers for the supply chain and general operations, says Pierre Mitchell, an analyst at AMR Research.

According to Mitchell, Webango has found a niche with great value to users: streamlining the creation of RFPs and the analysis of bids. Negotiated contracts that require RFPs account for half of all procurements, Mitchell says. Corporations can potentially benefit by saving on internal procurement costs, having better relationships with suppliers and paying lower prices for goods and services, he says.

Many of the larger online-exchange and supply-chain infrastructure vendors don't have such products, says Mitchell, but he notes that major vendors like Dallas-based i2 Technologies Inc. are likely to start adding such front-end services soon.

Webango may also face competition from e-commerce exchanges that want to extend their services. Finally, some supply-chain analytics companies, such as Palo Alto, Calif.-based SeeCommerce, are potential rivals, Mitchell says. But for now, Webango's strongest competition will come from other start-ups, including the following:

MindFlow Technologies Inc.

Plano, Texas

www.mindflow.com

MindFlow's ProcureMind e-procurement service provides the up-front process and methodologies for supplier selection but isn't strong in bid analysis and contract management.

Healy Hudson AG

Munich, Germany

www.healyhudson.com

This vendor offers a similar range of services in Europe and is beginning to offer its services in the U.S.

ShareMax Inc.

Parsippany, N.J.

www.sharemax.com

ShareMax's Sourcing Management System suite also has request-for-quotes workflow features, but recent layoffs might be an indicator that the company is having financial problems, says Mitchell.

Webango Inc.

Location: 3508 Bassett St., Santa Clara, Calif. 95054

Telephone: (408) 562-9925

Web: www.webango.com

The technology: Automated RFP-creation and bid-management system

Why it's worth watching: Its service speeds the procurement process, saving time and cutting costs.